Friday, 27 November 2015

Industry Practice – Retail Sales – 'Virtual Brokering' Creates a Triple Aspect Realm

Although there has been much written in the press and by apparent sector disrupters (ie uber) about the change in western consumer attitudes regards the private car – ostensibly the manner in which the 'millennial' demographic has fallen out of love with cars – the fact is that western nations have seen a return to (or near) pre-2008 new car sales highs; thanks predominantly to the combined availability of cheap and available credit and pent-up new car (and fleet vehicle) demand.

Thus far, by October-end 2015 the USA has seen light vehicle sales of 18.2m units on a SAAR basis, Canada approximately 1m units, the UK with 2.3m units (now seemingly peaking), and Europe (exc UK) with 9.5m (also possibly peaking).

Whilst the oft over-looked used car market, in terms of turnover puts new car turnover in the shade, its national market varying from x3 to x6 the new car volume depending upon region.

Cars Still Reign as Social Symbols -

It is inevitable then that although perceptions regards the high status of the car has altered, with once prestige brands now available,and still 'top of the tree' in the B-segment and the massive increase in volume somewhat diluting past reverence, the fact is that as the most outwardly visible consumer item associated with lifestyle and so self-perception and ego, the private vehicle remains for most (if not all) the most prized new purchase possession.

Yes, for its high price the new car remains largely an idle asset given its limited functional use across a full 24 hours, but the very fact that the counter-point, counter-culture of “car sharing” ventures has not grown in as greater popularity as envisaged by many 21st century forecasters indicates that, even as urbanisation increases in the west, for the most part across the city suburbs and provincial towns, the car maintains its socio-economic role.

The 'Battle of the Brands' is a well known phenomenon amongst car-makers themselves, with (as ex BMW's Wolfgang Reitzle well recognised by the mid 1990s) brand association as great an impetus to the consumer as the rational decision-making. It is the reason the Japanese created their near luxury brands in the early 1990s, and why PSA regenerated the DS brand as something more superior and likewise Hyundai today with Genesis. That impetus not changed in essence and typically relates to the conventions of status, but in more cash-constrained periods such as today, an inverse snobbery also has its place, whereby the likes of Skoda and Dacia – albeit price-point distinct - are seen as intelligent choices compared to their higher cost, mid-stream brand cousins.

Value Driven Purchase Rationale -

As was well noted some years ago, well before 2008, the mid-stream market had slowly begun to fragment and separate into status choices and 'commodity' choices. The mid-stream obviously still accounts for most sales, but the consumption trends toward either 'conspicuous' or 'logical' buys still persist. This becomes far more blurred in the used car market obviously, depending upon brand, model and regional availability, but as the very essence of used car buying continues to evolve, so it seems likely that similar and more distinct trends in purchase prompters become clear.

Car brands are of course very well known given their high profile in society, but what of the distribution channels?

New Car 'Relationship Retailing' -

In the formative Edwardian era the retailer of the car was as important, if not more so, than the vehicle manufacturer, given that one's direct relationship was with the local agent. Those agents located in the prime shopping 'arcadias' of Piccadilly, Knightsbridge and Kensington in London of course had counter-parts in Paris, Amsterdam, Berlin etc, and were often themselves from amongst the buyers' social set. (The story of Rolls-Royce itself that of aristocratic marketeer conjoining with 'middling' engineer to sell to remaining gentry and nouveau-riche).

Even after decades of social change, likewise though to a lesser degree, the importance of locality and bonhomie endured; as seen in the early 1970s with Datsun, Honda and Toyota's progress in the British suburbs. Long established family garages took on these new franchises, the close relationships those family businesses had created the basis of trust for various customer types – old and new. The husband might have been loyal to his Ford Consul-Granada or Rover 2000, but his wife would be keen to 'move-up' from a second-hand Mini into a new school-run Honda Civic, Datsun Cherry or even slightly bigger yet still affordable Toyota Corolla. This pattern simultaneously seen in North America.

Thus, unlike the power of the manufacturer's brand today, and the weakened state of retailers, it was typical up until the mid 1980s that the local agent maintained much of the retailing power to a discreet, local, customer group. This situation existing for much longer in the USA, especially mid-western and more remote patriotic regions, given the level of innate dealer protection, to in turn help protect Detroit's supply and demand; diminishing at the turn of the new century.

A Changed Retail Environment -

Of course over successive decades client-dealer relations underwent rapid changes. More brands and models were introduced, advertising became far more sophisticated, creative and influential - arguably reaching its pinnacle by the late 1980s and early 1990s – but as an ever greater volume of cars entered a single market, amid fierce competition, value destructive pricing eroded dealer margins, so destabilising the dealer's earnings power and thus the job security of dealer principles and his/her staff.

This most seen in the very liberalised UK market, to assist inter-European trade, but also later in the the (semi-protected) USA and even the small suburban monopolies of France, Belgium, Holland and Germany; Italy able to maintain a protectionist attitude because of political and consumer patriotism – against the Eurozone grain - far longer.

But ultimately as the sales environment became ever more harsh and ever 'slimmer', so the once esteemed role of the dealer-agent built-up over decades rapidly altered to that of yet another optional sales channel.

And of course, whilst savvy shoppers previously looked and telephoned around for the best deal in town, or indeed further afield, it was the simultaneous emergence of the used-car super-stores and the forever growing internet that had an impact upon the local dealer-agent.

The former created business models and sales techniques to “stack 'em high and sell 'em cheap”, or so the public was told, but in fact became 'prisoners of process' to maintain 'sharp-selling' profitability.

The latter of course offers a seeming world of opportunity and possibilities, with the ability to create a broad or narrow range of search options depending upon buyer criteria; though this itself is influenced by the spectrum of options available, ironically making choices harder if not disciplined.

Scaling Up to Battle On -

In reaction to the early days of these new disruptive inputs independent and franchise dealers improved their own business models through relocation, scale enhancement and cost-cutting. Often trading in older smaller premises for much bigger sites on easy access multi-lane roads and undertaking local acquisition of competitor dealers as part of the growth agenda. Amongst the mainstream brands, they might build their own portfolio of similar brands to provide apparent choice to the more demanding consumer, or indeed create their own brand ladder (akin to Sloane at GM in its early days) so that various buyer types could find the specific brand they wanted, and also similarly seek out their lesser second car for the family, or perhaps a smaller more fuel-efficient car for ageing parents.

Furthermore, some have sought to stave-off the damaging influence of car super-stores, established dealer groups would go on to seemingly mimic the model, even if in reality in name only via the internet, to help steer potential customers away from their undermining competition.

And likewise, with the rise of large dealer groups able to better manage new and used sales so as to protect resale values, and the rise and rise of web-based retailing, so the role of the vehicle auction house has diminished year on year, now specialising in the re-sale of ex-fleet vehicles with corporate clients seeking speedy liquidations of their balance sheet based 'end-of-life' assets.

Thus, just as the environment changed, so very necessarily, did the modus operandi of the 'agent'; long family run business overtaken by the consolidation techniques of highly professionalised dealer groups.

Today, of those groups we see names like:

UK: Lookers, Pendragon, Synter (pvt), Inchape, Jardine (pvt) (latter two international)
USA: Penske Auto Group (international), AutoNation and Group 1 Automotive
Europe: Porsche Holding Salzberg (pvt) [with various others seeking to mimic its strength].

Obviously, having rationalised on a geographic basis, such groups also recognised the threat posed by the internet. Critically, its ability to provide a massive virtual market-place effectively spanning the nation, or indeed in Europe's case, nations. Most concerning – as proven a reality – it used as a instrument to provide the consumer with bargaining power, and with that a re-run of highly competitive, value destructive environment seen earlier and that dealers had sought to escape.

So of course, to combat this threat, dealer groups have long offered themselves with virtual shop windows of varying sophistication. (Moreover, the likes of Inchcape and latterly Jardine have sought to internationalise into stable and growing AM and EM regions, the latter operating in Hong Kong, Macau and China).

The Virtual Showroom -

However, just as with the disruptive consumer influence of more mundane discretionary consumer goods, the online market-place has undoubtedly altered buyers' habits.

From the simple researching of models, variants and prices of standard 'batch-made' cars through regional dealers' inventories, to the near 3-D virtualised selection of colour, trim and options applied on-screen for an illustration of a potentially wholly tailored car; each choice made intended to create an greater engagement with the potential buyer.

Thus the on-screen world has allowed for greater convenience, reduced in-store sales pressures, greater realms of exploration and ultimately deeper immersion. Consumer's almost 24/7 web connectivity has assisted and indeed by promoted by manufacturers into what has come to be an expected 'play and pay' experience. This in turn has assisted the channelling of prospective sales into the hands of authorised brand dealers, whether VM owned or independent as part of the necessary advancement of the melded virtual and physical sales environments.

New Entrant Disruption -

Yet, diametrically countering this persuasive effort, intended to maintain at least decent margins for manufacturer and dealer, has been the ever increasing raft of on-line car-buying brokers, who set themselves up as prime 'go to' consumer portals for the car buying process. This is done by demonstrating a massive catchment area offered, usually nationwide and by plying a memorable or trust-worthy sounding brand name and persona; typically as the buyers' helpful 'best friend'.

Thus, as seen with the accompanying graphic, the car-buying world is today split into three distinct, yet merged arenas:

1. Physical Retailing:
the century old traditional model of physical dealer with factory ordering and on-site inventory
(as with the dealer groups mentioned previously)

2. Virtual Retailing:
the 20 year growth of dealer group websites which direct interest to specific dealers, but may allow the viewer to see all of the group's regional or nationwide inventory, so as to allow for intercity transportation of a buyer's desired vehicle.
(as with the dealer groups mentioned previously)

3. Virtual Brokering:
the 15 year existence of on-line marketplaces dedicated to vehicles, and critically unaffiliated to manufacturer and dealer entities, has spawned a newer realm of independent providers, in both brand presentation, spirit and business model. They typically promote themselves as offering a greater choice of vehicles, routings to optimised sellers and often with a better comparison-based end deal for the consumer.

Virtual Retailing and Brokering -

Companies which operate in this on-line marketplace 'space' include:

- (USA)
- (USA)
- (USA)
- (UK)

These firms have effectively sought to 'piggy-back' the rising tide of independent comparison information providers and associated websites. Some actually established from those very origins, whilst others have sought to present themselves in a similar manner.

As regards the rapidly changing dynamics of the new and used market, whilst Glass's Guide was once the renowned and closely held pocket-book of British used car dealers, it has become a consumer-facing entity in its own right, today with offering 'comparison' and 'finder' resources.

Its counterpart in the US has been the 'Kelley Blue Book' since 1926, spanning cars, light trucks and motorcycles. It has rebuoyed itself in recent years on-line to maintain its 'go to' service provision in the face of ever increasing competition, formal and unofficial.

One such has become renowned as the website to gain an unfettered understanding of new and used values; Edmunds however, not providing a sourcing feature so that it might remain unbiased.

Ebay - A Partial Operator:
Quite obviously the auction and retailing website ebay offers a method by which used and even new car sellers can reach a broad audience. Very well established, operating on a national basis and generally respected given the buyer-seller ratings mechanism, / / et al has perhaps become the default first stop shop for those seeking both general and specific models and variants.

Critically, the website has been seen to offer even unregistered vehicles from various independent dealers, typically small and specialist in nature, seeking a best price for specific cars – such as run-out luxury models (Ferrari, Aston Martin, Lamborghini etc) – which otherwise would have to be substantially dropped in price if remaining within the dealer's showroom. These ebay using on-sellers are often a somewhat secretive arm to such dealers.

And obviously, given the anonymity of seller and buyer, ebay is undoubtedly used by nefarious sellers and their accomplices (boosting ratings) as a method for deceitfully obtaining a puurchaser's funds without providing the paid for goods.

Similarly, as re-noted by the FT recently, given its size and scale in EM and BRIC regions, the luxury goods market – from jewels to art to new and classic cars – is used in a criminal manner by those seeking to launder illicit finances. Thus ebay and others, being lightly regulated and lightly monitored, are seen by the police and authorities as unfortunately almost ideal for any sizable laundering process, across one large ticket item, or more likely, broken down into many more smaller transactions.

Thus whilst undoubtedly a favoured channel for legitimate sellers and buyers of typically used, older vehicles, ebay has innate perceived disadvantages upon which the newer crop of vehicle brokers, dealing in both new and used cars, seek to circumnavigate.

Summary of Newer Entrants - (USA):

This was the first of the breed, created in 1998 by the entrepreneur Scott Painter, to sell cars wholly on-line, not referring to a 'bricks and mortar' dealer.

He had previously formed a line of start-up companies, with auto-market interests starting with the electronic data-base AutoAccess, and a low production-cost car venture named Build-To-Order. AutoAccess, or similar, provided the information platform for Painter has promoted himself as the deliberate disruptor of the traditional, staid and “ripe for revolution” vehicle marketplace.

Whilst 'BTO' flailed given its enormous challenges, it seems likely that Painter's ambition is to undertake disruptive change across both the production and retailing of cars, this academically known in its most ideological guise as 'Micro-factory Retailing'

The operation had been marketed as ripe for an IPO in 2000, but unfavourable circumstances (ie the collapse of inernet stocks in 1999) precluded that hope. Instead being sold to the Private Equity firm KKR in 2014 for $1.1bn.

It is now part of the Internet Brands group, which itself is a much expanded commercial enterprise originating from CarsDirect, had undergone an IPO in 2007, but was de-listed from NASDAQ when Hellman and Friedman bought it, and latterly (as seen) via a PE trade sale to KKR. (USA):

The ambition of this corporate website was to have a broader ambition than others, in as much as it has sought to span a greater automotive commercial 'bandwidth', with interests across vehicles (reviews / advice / comparison), financing and insurance. It thus seeks to offer greater 'one stop shop' facility for those who require more immediate convenience.

Established in 1997, the firm is majority held by the the Automotive arm of Cox Enterprises, a media orientated conglomerate which owns the 'Kelley Blue Book' operation. Its intermediary holding vehicle is the AutoTrader Group. With that association has been able to grow its recognition. In 2010 the private equity interests of Providence Equity Partners (at 25%) and Kleiner Perkins Caufield and Byers, likewise too a stake.

Very usefully offers a two-way transaction routes, one for a private buyer seeking a new or used car, the other a double aspect service for private used car sellers. The first to contact local or regional dealers to gain a valid price on their vehicle for either cash sale or trade-in against another in-stock car. The second a tiered service by which the seller is assisted by the firm to best promote the sale to another private buyer. Moreover, dedicated apps have been created for the most popular smart-phone operating systems to broaden appeal and use. (USA)
The second of Scott Painter's efforts. Established in 2005 the firm attracted over $200m in private equity backing so as to undertake a nation-wide advertising campaign. Well received by consumers, it was however immediately problematic for incumbent manufacturers and dealers who objected to what appeared significant on-line discounting of their vehicle inventories. Over a dozen states initiated investigations requiring a change to TrueCar's virtual 'store-front' so as to be compliant with standard practice.

The fact that TrueCar did indeed need reformulate its website - part of an overall restructuring - may have been as seemingly damaging to the brand, but may equally be argued as actually quite PR positive. It is likely that the 'discounting' perception has remained within the public subconsciousness, even though pricing regimes are now far more aligned with dealer expectations and needs. This has been managed by using a dealer certification regime, which is likely to have assisted in TrueCar's referred “per unit price reduction” negotiation.

The 're-launched' TrueCar took effect in 2012, and grew affiliations with its 'marketing partners' including financial institutions, membership based organisations and large enterprise employee buying programmes.

It also provides data-based consulting services regards vehicle valuations and future residual values for lease and loan companies, financial institutions weighing risk exposure of their own lending categories and fleet management companies. (UK)
AutoTrader Group has long had a stranglehold on the used car advertising publications sector in the UK, about a decade on from its inception in 1975. Although previously (and still partially) competing against local private sale classifieds, the local paper advertising of used car dealers and the likes of LOOT and similar, AutoTrader's simple and effective brand identity and its over-riding continual presence on the shelves of magazine retailers means that it has build an strong nationwide presence.

The now defunct magazine's circulation peaked in January of 2000 at 368,000 copies, its sales dwindling since, reaching a low of 27,000 in March 2013, with a final hard-copy edition in June of that year. The website had been established in 1996, and inevitably substituted for the magazine, allowing users to buy and sell on-line. The website has recently seen an average of 10.3m users per month. Mobile phone and smart-phone access has likewise been encouraged, with the provision of broad handset availability in 2009; the apps for apple products launched in 2010.

By December 2014, it was publicised that 92.2% of Britains knew of the brand and what it did. Like others, it recognised the need to diversify within its prime segment, so latterly offered services to dealer group retailers – with a reported 60% of dealer sales also advertised through the website – and also finance and insurance products to the general public.

In March 2015 AutoTrader's owners decided to partially monetise their holding by releasing 59% of the group via an IPO as a public listing on the LSE. The 590m shares issued provided £437m after fees, and provided a nominal MktCap of the company at £2.35bn

The Much 'Shifted Sands' of Auto-Retail -

As seen, decades ago the purchase of a new car was heavily influenced by the strength of the personal relationship with the local agent or dealer. Trust and personableness were necessary, indeed vital, features well understood as critical by the often family-run proprietors. This the pattern until the early 1980s.

However, as those local businesses were acquired by larger and larger dealer groups, so the personableness was gradually lost, especially amongst low margin mainstream vehicles. It remained in part within the luxury brands, but even here the large turnover of staff meant that return contacts were lost. Instead dealer principles looked to the new world of CRM (customer relationship management) whereby 'invitation only' new model launch events, and preferred client away-days, were seen to be better methods for retaining loyalty.

However, the fact is that since the increased use of smart-phones people themselves are less and less open to periodic or easily forgotten brand names. Thus for the average car buyer, dealer group names like Glynn Hopkin or Bristol Street Motors have become diminished. These names may have meant much to their fathers, but less and less to them. This is recognised by the umbrella holding companies and they in turn have sought to re-invent themselves regards identity, with the relatively newly established Vertu Motors acquiring Bristol Street Motors, etc. However, even with seeming brand reinvention, and a good slice of the TIV upturn, it is essentially still regional locality and the value of the deal to the walk-in buyer that dominates the dealer group. Not the brand relationship (ie brand equity) that has 'share of mind'.

Thus, the likes of Vertu Motors, and its many counter-parts, are far away from the brand presence the likes of CarsDirect or AutoTrader enjoys today, and very likely into the future.

The auto-market's newer, wholly web-based entrants obviously seek to gain the kind of brand presence for new and used cars as AutoTrader has done for pre-owned. Their notion, to create a strong brand bond that hyper-realistically mimics the aspects of trust and personableness arguably not seen – or at least perceived - for decades. Achieved by being “in the palm of the users hand” and so “top of mind”. Effectively, they wish to gain the same level of brand knowledge and brand equity that car manufacturers themselves enjoy having built it up over many many decades; but to achieve this within a 10-15 year time-frame. In essence comfortable familiarity.

With such an ambition, it is well worth better understanding what some of the key financial measures are, between the 'advanced old guard' of publicly listed dealer groups and the 'progressive new guard' of similar web-only retailers.

Comparison of Key Figures-

Mkt Cap / Price to Earnings / Price to Book / EV to EBITDA / Profit Margin / Earnings Growth / Cash to Debt

Physical (& Internet) Dealer Groups
United Kingdom:
Lookers £666.9m / 13.7 / 232 / 692 / 1.5% / 7.8% / £20.5m vs £92.4m
Pendragon £621.4m / 7.54 / 162 / 421 / 1.96% / 130% / £149m vs £202m
Synter Owned by Penske Automotive Group of USA
Inchcape £3.35bn / 20.6 / 275 / 1,000 / 2.5% / -8.7% / £450.4m vs £419.7m
Jardine Motors Owned by Jardine Matheson
Vertu Motors £255m / 13.3 / 134 / 794 / 0.87% / 28.7% / £39m vs £6.9m

United States:
AutoNation: $7bn / 15.8 / 3.1 / 12.2 / 2.25% / 11.3% / $63.9m vs $5.4bn
Penske Auto Group $4.2bn / 12.7 / 2.3 / 13.2 / 1.75% / 16.2% / $49.7m vs $4.35bn
Group 1 Automotive $1.9bn / 13.7 / 1.9 / 11 / 1.4% / 73% / $22m vs $2.66bn

Porsche Holding GmbH Owned by Volkswagen AG

Mkt Cap / Price to Earnings / Price to Book / EV to EBITDA / Profit Margin / Earnings Growth / Cash to Debt

Vehicle Locator Websites
United Kingdom:
AutoTrader Group £3.92bn / 65 / n/a / 2,600 / 22.6% / 504% / £12.1m vs £461.2m

United States: Privately Held $720.5m / 142 (exp)/ 2.7 / -19% / -16.3% / n/a / $124m vs $27m Privately Held

Basic Interpretation -

A quick and dirty review of these key figures demonstrate just how world's apart the two 'old' vs 'new' business models appear.

The commercial weight of the traditional and conventional incumbents can be seen by the scant profit margins seen even recently, the costs of: real estate, sales staff, large back-offices and distribution illustrating that even though US and UK regional car markets have enjoyed a robust rebound over the last 3-4 years, it is only now that minimal profits are being seen.

In the UK this ranges from Vertu's 0.9% to Inchcape's 2.5%, the latter assisted by its focus on premium marques and internationalism. And likewise in the USA ranging from Group 1 Auto's 1.4% to AutoNation's 2.5%, and these figures only achievable after impressive ongoing quarterly growth rises, Pendragon's 130% best amongst its UK counterpart, and Group 1 Auto's 73% likewise in the USA.

Obviously, given the fact that these are well established, and well understood retailers, operating within a cyclical field, it is unsurprising that the respective price/earnings valuations are within expected bounds and generally accord to the component-part mix of the underlying metrics.

Of the newer crop of internet retailing and sourcing websites, only the American and Britain's AutoTraderGroup provide insights, since they are the only two entities presently listed on the NASDAQ and LSE exchanges.

Herein, we see that both companies, in comparison to 'bricks and mortar' operations, have high p/e values: AutoTrader on 65x and TrueCar on 142x.

Given the UK market saturation aspect of AutoTrader Group's prime business, its high p/e ratio may be deemed either overtly high given that it is effectively a matured business, or indeed rightly valued given that it has such a monopoly in 'share of mind'. To paraphrase Warren Buffett's terminology it “enjoys a market moat”. However, disadvantageously, the business's immediate 'cash cover' is only 2.6% of the overall debt level; thus no doubt suffers from its debt servicing costs. Thus although new to the IPO market, its highly matured composition means that it is very different proposition in character to many high expectation, web-based IPOs; such as Ocado previously. On that p/e basis, AutoTrader arguably looks fully price for now, awaiting the likelihood of international expansion,

Far smaller, in MktCap terms is TrueCar in the USA, but its apparent potential - shown with over double the p/e valuation of its seeming UK counterpart – appears far higher. This a function of not only the room to expand into its potential advertising slice of the overall US space, but critically also buoyed by a wider range of separate yet intertwined service provision B2C and B2B income streams. Presently a cash-burning, inwardly investing operation suffering volatile growth, it at least has a cash-pile which is a very strong multiple of its debt (4.6x) which will undoubtedly be used primarily upon an ongoing nationwide press campaign, itself supported by its young youtube channel. Via its youtube adverts, it is recognised however that inevitably the TrueCar formula of seemingly offering transparent, 'like for like' comparisons of local vehicle sales deals is hard to quantify given that any dealer, and even cross town dealers, typically do not hold exact 'like for like' model variants, so the pricing mechanism is only itself a rough guide. Moreover, the adverts suggests that the TrueCar business model innately favours those dealers which can offer greater discounting, these inevitably the large scale dealer group: Penske, AutoNation and Group 1 Auto, etc.

Ultimately, the lofty p/e valuations of Britain's AutoTrader Group and America's TrueCar are only good guestimates, and could be said to rely much on an ever-expanding new and used car sector, when the former may be now plateauing for a period, with any such 'slack' taken up by the latter as people trade-in 3 year old cars so inflating used car inventories. But critically AutoTrader Group appears to be awaiting international expansion, whilst TrueCar promotes its brand as the “car buying friend”.

Lastly, given that the very name AutoTrader exists on both sides of the Atlantic – as the British entity and the privately held American enterprise – it seems almost inevitable that some kind of future relationship will be born between the two companies. Whether the UK listed Manchester firm eventually seeks an acquisition of its American 'dopple ganger' with a purchase from Atlanta's Cox Enterprise, or any possibility of the reverse, remains to be seen.

Rebalancing the Retail Channel Mix -

What is obvious today and into the future, is how the now immensely brand-centric consumer realm has itself been diced, sliced and effectively 'funnelled' by the immediacy of the smart-phone. And likewise the consumer is being 'funnelled' toward a select band of large and mega-sized retailers.

It seems then that consumers will be given ever greater choice, and be assisted within the car-buying process, but on a national level at least, that expanded model choice will be offered by ever fewer, though thankfully publicly listed, dealer groups.

The resultant message for today's auto-makers is that the previous 'shifting sands' of the marketplace continues, with tomorrow suggesting a rebalancing of the business and profit equation, as the third realm of 'virtual brokers' gain ever greater traction.

As dealer consolidation grew in the 1990s and 2000s, so we saw manufacturer's expand their interest of in-house dealer operations, perhaps none more so that “Porsche Salzberg” with recognition that its distribution chain, assisted by captive credit, was perhaps even more important than its supply chain, given the importance of corporate proximity to the buyer and end user.

With the new threat of 'virtual brokers', ultimately seeking ever greater referral discounting from auto-retailers, it is inevitable that those auto-makers and dealer groups who reside on either their brand laurels or geographical strangleholds will be undermined.

The future of auto-retailing then is a triple aspect realm; and obviously those who can orientate those central pieces to their own advantage will support long term profitability.

As to whether AutoTrader's, TrueCar's and others' ultimate goals are to become direct-sellers of today's and tomorrow's automotive brands - so by-passing dealer groups and their heavy overhead – or simply seek an investment exit via absorption into the likes of Penske or Porsche Salzberg remains to be seen.

What is clear is that endemic disruption of the auto-retailing sector will continue as consumers own minds are effectively recalibrated to seek-out (perhaps overly superficial but powerful) 'comforting convenience'.

Friday, 13 November 2015

Company Focus - Elio Motors – Flight of the (Arizona) Phoenix ?

All things 'eco' has been the macro-economic mantra ever since the Kyoto Summit over twenty-five years ago.

Whilst Japan had been ecologically and sustainability minded because of its limited natural resources for many years, and had long been developing a low-carbon ideology, it wasn't until the efforts of America's Al Gore (with his scaremongering graph of near exponential CO2 growth into an 'untamed' future) that the West started to take 'climate change' seriously. That stance now somewhat undermined by John Kerry's recent visit to Paris, this era of cheap oil and US shale-gas reserves effectively promoting the use of fossil fuels as a critical element of economic expansion.

However, this new propensity for socio-economic, and critically industrial 'eco' change still underpins 21st century perspectives, and is driven as much by the desire to leverage the West's technical advantage compared to advancing developing EM regions dependence to date upon older methods, as it was about the desire to stabilise the quality of the air we collectively breath and the water we drink.

However, as now seen again with Kerry's stance, given its reliance on fossil fuels to power its 20th century ingrained economy, it was no surprise that America lagged the good intent of others, such as the Japan and Scandinavia. The former with research/development prowess and the latter with natural hydro-powered resources had good reason to promote the ecological ideology. Behind Gore's campaigning was no doubt the strength of Wall Street, America's global soft power advantage to have the US$ directed where necessary to buy-in foreign know-how where the previous technological limits of American capabilities fell short.

That said, whilst other nations had somewhat esoteric technical leads, the USA had and has the power of its own industrial history, its enormous domestic scale and its commercial ties across the rest of the world.

That has meant a resuscitation of old, yet meaningful industrial strengths, most notably a recasting of the 1950s 'futurama' dream centred around the beneficial properties of lightweight aluminium. Ford's step-change decision to re-engineer the body structure of its new F-150 is a subtler yet far more commercially powerful evocation of “new future” promise made by Airstream (leisure trailers/caravans) soon after WW2.

American big business then - depending upon its domestic and global strategies – is in a necessarily slow manner, undertaking its own reformation process, from Ford's scale use of aluminium to General Electric's scoping of small-scale, early-phase development ventures for applications in aero-engineering.

The investment communities located in Wall St, Palo Alto, The City, Amsterdam, Paris, Frankfurt and Milan – aswell as further afield – are trying to keep ahead of the 'ecological curve', yet are all to aware of the “ecological curve-balls” induced by wrongly backed technologies and companies that could be ultimately value destructive to the private equity interests of Sovereign Wealth Funds, Institutional Investors and HNW groups.

The transmogrification of the Transport Sector, through both evolutionary technical development and technical sector disruption is one of the primary fields for research, analysis and recommendation by investment luminaries. Yet whilst such 'future forecasting' investment minds are able to digest what is on the development horizon - Jim Mellon a good representative – the ability to predict and help guide such change to deliver prosperous futures for societal stakeholders and investors alike is another challenge altogether.

Especially so when, as history demonstrates, any such new desire for socio-economic change (itself under-pinned by technological progress can be a band-wagon upon which many decide to ride, from the wholly optimistic and naïve to the snake-oil sales-people promising much and delivering little if anything.

Given its immense importance to society, along with energy, life-sciences etc, the transport sector – and specifically the personal transportation device (from car to bicycle) is an arena that has always been seen as ripe for re-invention.

The lightweight, fuel-sipping and affordable new car the seeming ideal – today of course with aligned ecological impetus.

The early success of the Edwardian quadricycle car (eg Ford and Morgan) to the further 'democratisation' of the 'car' in the form of Voisin's tiny Scootamobile, its enclosed British counterpart the Peel Trident, the BMW Isetta to the long-lasting success of the Ligier micro-car brand (thanks to historical precedence of the French regulatory environment).

But as ever, given a combination of the public's automotive fascination, the influence of social trends and the immense financial value of the automotive marketplace, domestically and globally. there is always the “visioneer entrepreneur”, many it seems originating from the West Coast of the USA with disruptive vehicle models as well as disruptive business models.

Whilst the reach into new sectors by the Californian 'IT Technocracy' is best exemplified by Tesla Motors' efforts with its pure EV sportscar, sedan and yet launched SUV, far from its Fremont factory is another far less known hopeful who likewise seeks to change the mode of personal transport, in a 'radically conventional' manner

A radical form, conventionally propelled.

Elio Motors -

Established in 2008, this start-up has sought to propose what at first appears to be rational eco solution for today's and tomorrow's rapidly growing urban and suburban dwellers; firstly across the USA and latterly elsewhere.

The proposition itself appears notionally futuristic given its unconventional 3 wheel configuration., but infact could be viewed in the realm of 'retro-futurism' given its ancestral forebears. This appreciation with a commercial model centred upon the reconfiguration of cheaply available components means that it could be said to have the philosophical overtones of 'steam-punk' if far from its aesthetics.

Most importantly, with its HQ in Phoenix, Arizona, the start-up firm has specifically chosen to mimic the central message of the now legendary 1965 film 'Flight of the Phoenix'. Done so in its central business model by reconfiguring off-the-shelf components available from a standard compact hatchback or sedan into a new overall redesigned and adapted conceptually new proposition.

Just as the crew and passengers of the ill-fated cargo plane in the film combined to produce their own phoenix to escape the Libyan desert, so the board and staff of Elio Motors continue to hope that it can create its own 'white space' innovation in what it sees as the contemporary desert of vehicle invention.

[NB this but one example of how Hollywood's once fictional output has had such an effect on the public consciousness that US money-men seek to leverage that associative relationship in new enterprise].

The Elio vehicle itself appears part car, part motorcycle given its 3-wheeler configuration, whereby two lead wheels are followed by a trailing single wheel.

This intentionally done so as to fit with regulations that allow those with either a motorcycle or car licence to drive. This then seen as casting a wide net over theoretical potential buyers, especially the young who are reported to be less inclined to undertake the efforts to gain a car licence, and indeed run a car, given their increased urban lifestyles and compressed income levels. Instead more likely to ride a bicycle, scooter or motorcycle, and so in turn more likely to view the Elio with greater favour.

This the perceived theory at least.

The 3-wheeled vehicle itself is best described as a fully enclosed, fuselage based, tandem 2-seater, with front engine located FWD. So utilising a direct technology transfer from the small car segment, itself in use for the last 40 years. As seen by the accompanying photo, to the lay-person however the foot-print and over appearance is far from the norm.

Likewise, the Elio re-deploys the usual comforts of a small car, such as steering wheel, power windows, full seats, and safety systems such as air-bags.

The firm's website seeks to convince of the proposition, espousing the low price point of $6,800 , the 84mpg fuel efficiency and being American made.

However, attraction statements such as “gas prices constantly spiking” and comparison to the average “flatulent cow” are flawed.

Presently crude and sweet oil is at record lows, and with good margins at the pumps for integrated oil companies and the political desire to maintain low gas prices the idea of price spikes is an anathema. Likewise, comparison to a cow is disingenuous, since a the typical dairy cow (being a ruminant) actually emits a great deal of green-house gas per head, hence the concern about the global effect of milk and meat production.

A far truer description is given about the re-engineering of the vehicle, its fit for purpose approach and the design for manufacture and cost approach.

Yet realistically, Elio has chosen to effectively bolt-on the front 'cradle' (engine, gearbox, sub-frame suspension, brakes and wheels/tyres) to the front of its 'fuselage'. Combined these components make up a large 'module' and can be sourced from used cars or obviously from suppliers as discrete elements. Thus say the front end of a previous generation Chevrolet Spark, Ford Ka or Chrysler/Lancia Ypsilon could be used, or even something larger from the Compact category in the USA.

Historical Re-Cap -

Both 'old time' engineers and investors will state that “nothing under the sun is new”.

The motorised tricycle (or trike) is as as old a format as the 4-wheeled quadri-cycle. In fact what many consider as possibly the first automobile, Cugnot's steam dray wagon of 1769 was itself a 'trike', with single front wheel at the front (with boiler beyond), the layout of many motorcycle based trikes from the Victorian era onward.

The layout has been historically successful in the commercial utility realm, initially in farm tractors (eg Farm-All, John Deere and many more). Then as a small high mobility utility tractor unit for both trailers and with extended rear as a mini-truck. Typically within relatively confined spaces (eg dock-sides, railway freight depots, and general ware-houses), the models from Germany's Hanomag and Britain's Scammel best known from the 1920s through to the 1960s. Similarly, with a lighter payload and GVW is the Piaggio Ape, in city-truck and passenger guises, later licensed by various Indian (and other) manufacturers to produce the now legendary 'tuk tuk' taxi.

However, in the private passenger car arena the layout has (understandably) been less favoured.

It has been effectively understood that whilst the Edwardian Morgan and its Euro- American counterparts attracted early motorists for on low-level price and running costs - based largely upon motorcycle parts – as soon as “proper” small cars were made available both new and critically second-hand, the very formula of the motorised trike was deemed to rudimentary, and so by-passed by the vast majority of the car buying public. Hence, the public's preference for the Austin Seven or Peugeot Bebe of the 1920s and 1930s and the Austin Mini or FIAT Cinquecento of the 1960s, etc.

Nevertheless there have been various efforts to create an all conquering 3-wheeled private vehicle for the masses, well before the Elio. Many failures, and a few moderate successes.

The Single Front Wheel Configuration -

The high mobility enjoyed by the likes of the Hanomag and Scammel tractor and truck workhorses was also touted as a new USP for potential private vehicles, none more so than during the late 1940s with Davis Divan car on the USA.

Billed as 'the future' for somewhat cash-strapped consumers and returning service-men, its wheel layout was marketed as akin to that of the landing-gear for the exciting new age of jet aircraft – the front wheel replacing the trailing rear jockey-wheel. However, history demonstrates that its apparent entrepreneur was far more interested in raising funding for his own nefarious ends. The seed money and syndicated funds from 350 prospective dealers ultimately “absorbed” by a costly nationwide publicity campaign and seemingly 'lost' on other start-up costs. With only a few demonstrator cars built, it was recognised that the innovation and novelty Mr Davis promised to the many, most despicably using the public's goodwill towards servicemen, was little more than a questionable business platform for his self-serving monetary desires.

As regards the polar opposite...

Far more creditable were the efforts of Britain's Reliant Motor Co from 1935, through to 1956, 1973 and onto the early 1980s with the initial Regal, its successor the Regal II and later (in)famous Robin models.

The Regal had been created in 1935 (and followed similar other vehicles) specifically to cater for the many people (typically men) who were restricted by a motorcycle license. Those who sought their own self-trade delivery vehicle, or could additionally be used within a larger firm's van fleet, proving very successful. The design of the Regal II changed markedly to become far more car-like in styling given its post-war targeting of a new private car market. It was for those who had either having ridden a motorbike all their lives or having learned during the war and by 1953 with savings enough to either buy outright or put a deposit on a couple's or small family car. Typically sold to older folk, the Regal was also made available in van guise as a successor to the Regal Mk1. This model went through six iterations before the introduction in 1973 of the all new body Robin. Marketed as 'all new', this saw 3 generations with engine displacement increased and ongoing style and feature changes, ending UK production at the Reliant Tamworth site in 1983, and elsewhere by 2002 under different ownership. (Licensed for production in Greece between 1974 and 1978).

Cruelly named “the plastic pig” in its dying years, given its lightweight fibre-glass body construction, in its Regal guise (and in the early years of Robin) the vehicle made complete sense as a small and economical trade and private runabout. Although previously the BBC's Top Gear programme abused and ridiculed the Robin, it was safe enough when driven within its somewhat restricted limits compared to modern vehicles. The most concerning dynamic being the vehicle pitch during a braking turn, since the mass of the car is 'vectored' toward an unsupported corner.

However, wholly unlike the Davis Divan of America, it was born from necessity and consistently gave its customers good service and proved for many decades to be a sound business model for its private shareholders of Reliant Motors. Rudimentary in character but demonstrating itself as eminently capable in its limited capacity role.

Seeking to redeploy their capabilities in new market sectors Reliant created the The Bond Car Company and the 'Bond Bug' was launched in 1972, providing sporty appeal, novelty entry system, updated 'wedge' styling in a small 2-seater body.

After the Vietnam war, returning US servicemen who had become partially disabled or who had lost part or all of full left limb, and who had previously been bikers often (very understandably) chose to live the escapist dream – at least part-time – of the counter-culture classic film 'Easy Rider'. To do so a new trend for motorcycle based trikes was born, often using the cheap rear engine and drive-train mechanicals of an older VW Beetle for motive power. A trend which has continued in the biker sub-culture to this day, and at times upon which major manufacturers such as Harley Davidson and Honda have offered officially approved, externally built versions.

Later the Vanderbrink Carver was born using a self-tilt system for improved 'lean-in' cornering to better balance the centre of gravity, aid traction and provide new driver experience. However, with only a few sold Vanderbrink fell into bankruptcy by 2009. the same system has since been seen on BMW's CLEVER concept.

The Double Front Wheel Configuration -
(As per Elio)

Quite obviously there is far greater stability in having a layout which deploys two front wheels and a single fixed rear*; seemingly even better if FWD to ensure greater traction (as per the Elio).

[NB * the use of rear steering akin to a fork-lift truck, very problematic when deployed at anything above very low speeds].

As stated this double front steer package perhaps first popularised in the UK by the early Morgan Aero 3-wheeler. Itself re-produced more recently for the marque's 'connoisseurs' and to add additional authenticity to the brand.

Having seen the trend for race drivers to drift the tail through corners with the belief that overall speed was maintained, (often seen with raced Morgans), in 1923 the Voisin Brothers of France (of aeronautical fame) re-focused their experimental and progressive mindset upon cars: creating the 'Laboritoire' grand prix car. This likewise had a “front pincer” layout but used two closely coupled wheels at the rear instead of a single to prove better 'to the limit' traction. It was thus not built as a mass market car, but Voisin hoped it would influence general vehicle packaging; but did not.

Likewise the experimentalism of the period meant that by the forward-looking 1930s the industrial designer R. Buckminster Fuller sought to apply his heavily marketing derived, psuedo-scientific 'dymaxion principles', to the car. Having already deployed them upon much from domed-buildings to consumer packaging his team created the Dymaxion Car: a radical conceptual proposition ostensibly derived from Eastern European engineering principles (TATRA et al). It enjoyed 'forward control' driving position and commodious cabin space, both assisted by the rear engine, and even rear steering. The latter great in the city at low speeds, but highly dubious (and indeed dangerous) at any medium speed or above. Wholly infeasible for mass market, or indeed niche market, production, it was created solely to demonstrate a story of American creativity – even if actually adopted from elsewhere – and was shown at the 1934 'Century of Progress' Fair in Chicago.

By the late 1940s, with post-war austerity across Europe, the age of experimentalism had long passed. Instead European countries needed to mobilise its people for reconstruction and to earn export income. It was this that lead to Piaggio's revolutionary Vespa scooter. However, the fact that Germany was virtually prohibited to build a standard automobile – seen as an overtly “high value”, potentially high selling item meant that it forced to re-look to the 3-wheeler cyclecar idea and small and under-powered 4-wheeled micro-cars. (The only car exception was the VW Beetle, initially in small numbers for use by the Allies). However, this took far too many years to allow for immediate post-war earnings, with many bubble cars not released until the mid and late 1950s.

The ex aeronautical firms Heinkel, Messerschmidt and BMW, having given its advanced jet technology to the Americans, British and Russians, had to restart vehicle production far further down the 'value-added' scale, with 'bubble cars'. Best known are the Messerschmidt KR175 and KR200 between 1953-5 (ostensibly the same 'fuselage – tandem' layout of the Elio, though rear engined), and Heinkel with the more bulbous Kabine with side-by-side seating in 1956-8. BMW's Isetta was infact a licensed product from Italian firm Iso, yet saw domestic popularity between 1955-62 9also with a double rear wheel version). Fuldamobile operated between 1950-69 and offered models such as the Alta, Attica and 200 series. Many other micro car firms emerged, yet few actually prospered given the short commercial lifespan of the micro-car marketplace.

The 3 wheeler effectively disappeared until the mid 1970s, when (as previously stated) a new trend for trikes came to pass amongst disabled and older bikers, often seeking greater convenience, comfort and carrying capacity than offered by 2 wheels. In turn that trend was sought to be commercialised by both motorcycle manufacturers in small volumes and by other specially created niche build firms. To gain much needed differentiation the likes of the TriHawk were created; echoing the Morgan Aero single rear wheel configuration, but typically driven by a rear mounted small engine and deploying more side by side seating.

Elio Motor's: Re-Invention of the Forgotten Past -
The Story of the “La Mathis VL333” -

Paul Elio's vehicle development efforts represents a contemporary re-invention of a general concept that has been a theme of 'visioneers' from the past, one of them the French Emile Mathis and his 1940s venture. This perhaps a best fit parallel by way of the brief history of the 'La Mathis VL333'.

This taken from the Beaulieu Encyclopedia of the Automobile:

While best known here in the States as the man who teamed up with Henry Ford to build and sell FoMoCos in France (under name Matford), Emile Mathis had a much more detailed, nuanced and altogether interesting life in automobiles outside of his involvement with old Hank, from 1935 to 1938.

After selling his shares of Matford, he tried to build marine engines in the States under the Matam name, but after World War II, he returned to Europe, where he began work on what would have been a fairly revolutionary car. He called it the VL 333 – which stood for voiture legere, three liters of fuel consumed for every 100 kilometers, three wheels and three seats. It had a unibody structure, a Jean Andreau-designed body and front-wheel drive with a front-mounted 700cc boxer engine.

Mathis shopped the VL 333 around, but said that he couldn’t convince the French government to allow him to produce it, thus negating the question whether he could actually convince suppliers to help produce it. It appears he made just the one VL 333.
This then highlights how even by the mid 1940s the western automotive scene had been cast in stone, the standard architecture of the car as we know it well entrenched for nigh on 30 years, with likewise the market strength of large national and international firms; who themselves would produce alternative radical concepts but see little value is trying to disrupt the conventional model of mass private transport. A model which sits at the heart of broad and complex global economies.

Obvious Doubts Remain -

For all the examples of 3-wheelers over time, given the innate draw-backs of greater instability, increased chance of loss of traction and reduced packaging space, ultimately versus a comparable 4-wheeled car, the reduced overall proposition has many more performance and functionality deficiencies.

One old adage that 'trikers' and critics both agree upon is that given the centrally located rear wheel, “if there is a pot-hole in the road you've got three (not two) chances of meeting it”

The innate problems with the trike has meant that when Peugeot (PSA), sought to look into the world of urban light vehicle transport, prompted by the advantages of scooters (in which another company using the Peugeot brand operates), it chose another very different 'scooter - tandem' inspired concept.

The Peugeot BB1 of 2009 is a small tandem arranged 4-seater, with a necessary SWB, all-electric propulsion which critically offers 4 wheels. (Thus closer to a combined Daimler Smart ForTwo and ForFour, with scooter seating).

Idealism Over Reality ? -

As with the progressive efforts of others such as Amory Lovins and his hypercar concept (ultra lightweight and frugal, though conventionally configured), it seems that Paul Elio is indeed “a man on a mission” to revolutionise personal transport for the individual and, no doubt, ideally the masses.

Whilst his continued and undiminished optimism will likely gain applause from those who consider themselves eco-warriors, experimental consumers and technological early adopters, a car is very different to a smart-phone, 'wearable' or new food craze.

Although probably seen as the battling underdog versus the 'capitalist machine' that is Detroit, it is very possible that Elio Motors, beyond Paul Elio's own commercial desires, the 'white space' occupied holds a place within a broader conceptual picture – of scenario planning based potential outcomes – prompted by perhaps a fellow board member or other influential figure.

From its beginnings it seems that throughout commercial history the relationship duality of inventor-innovator with seemingly supporting commercial accomplice has been fraught with at first idealism, then latterly friction. The theory of course, from partnerships upwards, is that the commercially inclined and aware partner has the remit to raise development, production and distribution funds by which the innovators idea can be refined, marketed, launched and scaled-up into production for roll-out across a sales base.

However, all too typically, what seem the basis of a good partnership or syndicate is obscured by the hidden true intent of the commercial 'activist'. Either, selfishly seeking an interim living for themselves paid for by either the innovator's own funds, or with early phase presentational success from a third party; and at worst misrepresenting themselves as wholly 'on-side' with the founder whilst in fact acting as an espionage agent for an already sector entrenched competitor or rival start-up.

This may not indeed be so within Elio Motors, but in the all too common scenario whereby start-ups need business advisory from those with broad network interests and influence, the likelihood is always present.

It is invariably the soundness of this “innovator - commercialiser” relationship which underpins even the smallest chance of eventual market success; and this without the invariable battle against the ingrained norms of sector and consumer which in itself takes up so much time and resource.

Board Level Connections -

A view of the website show that various board members have connections to and experience of:

- Motor Liquidation Company (the once 'toxic' assets separated from new GM)
(hence the Shreveport facility)
- Daimler AG (via the previous Daimler-Chrysler entity)
- New venture and EV networks (ie CarWorks and Next AutoWorks)
- Supplier Networks (ie Lear Corp, etc)
- Distribution and Sales (ie Daimler Smart via Penske Auto Group)
- Commercial Real Estate (acquisition, leasing and re-purposing)

Concept Vehicle or Investment Vehicle ? -

But of course, beyond the high personal ideals of creating one's own car company – all the better with socially relevant credentials - there have been many occasions in the past whereby the generated publicity of a new concept vehicle, has in fact been at least part of a façade for the procurement of a factory site's freehold or long lease at low cost.

Typically acquired during the lowest point of an economic trough with the capital value gain as the economy improves. With indeed the possibility of the entire start-up business model re-orientated to take advantage of alternative 'new opportunities'.

This appears to have been one of the hidden aims of the now legendary Preston Tucker in post WW2 America.

He portrayed himself as a man who seemingly hell-bent upon the technical advancement of the mass passenger car with his 'Tucker 48' (popularised as the 'Torpedo').

He sought to offer tomorrow's safety features of a pivoting central headlight and under dashboard 'crash shelter' – both little more than publicity exercises given their true functionality. On the production side he specified cheaply bought, and not very well performing, surplus aviation engines, once again for marketing hype given patriotic and hi-tech overtones; which reduced the BOM (bill of materials).

However, unlike his very well self-funded, aeronautically inclined, notional counter-part Howard Hughes, when Preston Tucker sought the purchase of a massive war surplus factory, the sheer scale of the empty facility made those in the auto-industry question his wholly unrealistic ambition, if the site was indeed to be used, as stated, for the venture's own small manufacturing volumes.

Tucker sought to partly use (as he did) and thereafter sub-lease the facility to other auto-related firms. But few others were tempted. His back-stop, or possible real ambition, to 'flip' (ie sell-on) his interest in the all too large facility in better economic times also crumbled, given its enormous size.

The true intentions behind this seemingly wholly illogical decision regards scale were further blurred, or made clear, by his 'Pre-Order' accessories scheme. In post-WW2 America, those civilians who bought and paid for pre-ordered feature items and merchandising items could reserve a vehicle and not be bumped-down the order list by the official, and much publicly condoned, sales preference to returning service-men. This then obviously bringing-in early phase income.

Tucker's salesmanship and aligned business gambits were of course of their time, yet the post 2008 credit crisis also provided a once in a lifetime opportunity to purchase large, low value plant facilities, none more so than through the Motors Liquidation Company.

This time, as Fox News reported in January 2013, such properties were commercially handled by the RACER Trust, with dozens of ex-General Motors' sites on its books after GM's Chapter 11 restructuring. Yet a spokesman for the RACER Trust denied knowledge of the Elio proposal at the time. (The truth behind the innate politicking between negotiating parties was/is hard to ratify).

Elio Motor's targeted production site is Shreveport, Louisana, a 3.1m sq ft plant that previously produced GM pickup trucks and the mid-size truck based Hummer H3. Paul Elio wholly admits that the site is indeed overtly large and to help off-set costs seeks to create discrete partitions by which other companies can take up operations.

By January 2015 (Wikipedia states that) $65m had been secured, a further $230m was required, of which a hoped for portion worth £185m to come through the Dept of Energy's 'Advanced Vehicle Manufacturing' budget. The Italian tool and plant supplier Comau (a subsidiary of FCA Group) is said to be fitting-out Shreveport for Elio Motors' use.

Yet, to date, postponement of what may be called achieved 'project gateways', and it seems capturing of funds, means that little true apparent progress has been made.

It appears that the RACER Trust is well aware of the future potential of Shreveport and its many other sites (eg Livonia, Flint etc), and has a remit to ensure that it is able to capture both a substantive valuation increase of the worth of its real estate, and critically that any new use (auto-related or otherwise) is able to offer economic regeneration to the locale.

Hence RACER will be naturally weary of any firm that seeks to potentially buy and flip its stewarded properties.

Engine Timing -

Likewise, the intended 3 cylinder engine, apparently engineered by IAV has not come into fruition, so delaying the product and process time-lines.

Moreover, it appears odd that such a small-scale start-up venture would seek to create either its own engine, or chose to heavily modify what should be an 'off-the-shelf' unit. Indeed given the lightweight body construction, any number of readily available 3 or 2 cylinder engines could be feasibly used from other car or motorcycle manufacturers or direct from OEM suppliers, standard 'crated' units procured as necessary.

To End -

As seen throughout automotive history, there have been visionary dreamers who seek to revolutionise the everyday norm, from Karl Benz's first creation of the car through to Clive Sinclair's efforts with his C5 electric trike, and today beyond, some with semi-realistic aims and others with fantasist ideas.

However, the problem with those semi-realistic aims, with obviously Elio Motors at the margins of this envelope, is that the reality of creating a start-up alternative car company is fraught with problems, from product acceptance by the public and its massive costs of a marketing campaign, through to the sourcing of identical and near identical components and modules when up and running as a serious operation.

[NB the tribulations of the UK's niche vehicle industry in securing bought-in parts has often been a major contributing factor to product and business demise].

Alternately, as seen with Preston Tucker, either the all too commercially aware inventor themselves, a partner or influential internal/external figure, may be using the business as little more than a smoke-screen to actually acquire assets – typically real estate – at a low price. With the intention of being seen to attempt to run a respectable business, while in effect the auto-business model is set up to gain government aid (special enterprise zones for employment or eco-tech and ideally both), create a trickle of produced cars, and ultimately fold with the prized asset(s) sold off via a separate entity to ensure a cash windfall. Such an example today would see the any such large plant sold off to the FDI interests of a serious, large foreign entrant (most likely Japan [assisted by Abenomics], S.Korea, China or India).

This may well be the view the RACER Trust takes of Elio Motors and other similar efforts across the USA like it, simply an intermediary buyer-seller.

Only time will tell if Elio Motors has indeed caught or created the beginnings of a light-trike age for a new generation mindset, or if the diplomatic interests under-pinning FDI into the USA succeed.

Even if the latter, Paul Elio, if backers see a true possibility, he has the opportunity to fly his automotive phoenix elsewhere across the USA.

Perhaps looking at another 'bird' before doing so...the 'TriHawk' and its use of more cost effective, fuel efficient motorcycle technology. Only because little exists in this world which is “neither fish nor fowl”.